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18 June 2014
State of the Pacific, ANU
Chinese assistance in the Pacific: Agency, effectiveness, and the
role of Pacific Island governments
Philippa Brant and Matthew Dornan
What is Chinese aid?
• Total foreign aid budget now approx. US$6.4 billion.
• Bilateral aid provided in three main forms:• Grants• Interest-free loans• Concessional loans
What is Chinese aid?
Conditions
• ‘One China’ – must recognise PRC not ROC• Tied to Chinese companies and contractors
• Concessional loans must (in principle) procure 50% of materials from China
• Reflects links between aid, investment and development
Where is Chinese aid given?
• More than 120 countries• No official country-level data published• 50% to Africa• Pacific not a priority• 2/3rds given to ‘least developed’ and ‘low
income’ countries• BUT also given to countries with higher GDP
per capita than China
Key Actors
• State Council – sets policy direction
• Department of Foreign Aid (within Ministry of Commerce) – manages program
• Ministry of Finance – approves budget• Other ministries & bodies involved in sectoral-
specific aid
• China Eximbank – provides concessional loans
Key Actors
• Chinese state owned enterprises• Implement projects• Often commercially
driven• The ‘face’ of China• Initiate projects
• Chinese Embassies• Responsibility/
oversight in country• Manage political
relationship
US$850 million disbursed between 2006-2011 Australian aid over same period totalled US$4.8
billion 2006 concessional loan package RMB 3 billion New US$1 billion concessional loan pledge in
November 2013
Size of Chinese aid in the Pacific
Cook Islands
• Total aid US$34m over past decade
• New 3-year strategy for utilisation of grant money developed by Cook Islands government
• ‘World first’ trilateral project funded through existing concessional loan from China + NZ grant
Tonga
• Since 2008, assistance to Tonga has been dominated by two large China Eximbank concessional loans, worth US$120 million (28% of GDP)
• Repayment has been deferred, although not the maturity of the loan
• The loans were negotiated and decided on at the political level, with limited input from the civil service
Samoa
• China Eximbank loans are valued at 16% of GDP, and have funded construction of key government buildings
• Clear and transparent decision-making processes have helped to safeguard the role of the civil service
• Oversight of construction is generally robust, with the government outsourcing supervision to engineering/construction firms.
Vanuatu
• The way in which China Eximbank loans have been agreed is contentious, reflecting the political culture in Vanuatu, where political leaders are expected to channel state resources to constituents
• Contracting companies approach ministers with proposals and offers of Eximbank financing
• The Vanuatu Government has lobbied for grants and loans to cover project management costs, without success
Findings
• Political dynamics play an important role in determining the effectiveness of Chinese assistance.
• Institutional arrangements have had effect where used & when driven domestically – not imposed by other donors
Matthew DornanDevelopment Policy CentreAustralian National UniversityE: [email protected]
Philippa BrantLowy Institute for International Policy
Thank you
